Application of Mathematics in Business

Md. Nasir Uddin; BBA (Finance), DU. Cell: 01924 75 65 94; 01683 20 27 52
E-mail: nasir_findu@yahoo.com Page 1
Calculus
Differential calculus: concept, general rules, mathematical problems, practical problems related to
differential calculus.
Integral calculus: concept, general rules, mathematical problems, practical problems related to
integral calculus.

Differential calculus: concept

General rules
1. Derivative of any constant is 0. ( derivative o ).
If y = 2,

= 0. If f(x) = a,

= 0
2. Derivative of a constant time a function equals the constant times the derivative of the
function. ( " derivative
.
If y = 2

, ,

= 2 . 2

= 4x. If f(x) = 2

= 2. 2

= 4x.
3. Derivative of an expression can be taken term by term. (expression
derivative 4)
If y = 2

+ 2x - 10

= 2 . 2

+ 2 .

- 0
= 4x + 2

Practical problem solving related to differential calculus

Constant: , a, b,
Expression
y = 2

+ 2x 10
Term Term Term

Application of Mathematics in Business
Md. Nasir Uddin; BBA (Finance), DU. Cell: 01924 75 65 94; 01683 20 27 52
E-mail: nasir_findu@yahoo.com Page 2

Problem1: A manufacturing firm has the following cost function:
C =

+ 5x + 100; where x is the units of production. Find: a) FC, b) VC, c) AC, d) AVC, e) AFC.
Solution:
a) FC = 100 ( o} constant change i o}
fixed cost)
b) VC =

+ 5x (fixed cost y cost function o "} i

c) AC =

= x + 5 +

( AC = TC/Q)
d) AVC =

= x + 5
e) AFC =

Problem 2: A producers pattern of total revenue is described by the relation:
Y =

; where y is the total revenue and x is the number of units sold.

Requirement:
a) Units sold that maximizes total revenue
b) Amount of this maximum revenue
c) Total revenue if 15 units were sold

Solution:
a) Given that, Y =

= 100 (

- 20x + 100) =

+ 20x

Application of Mathematics in Business
Md. Nasir Uddin; BBA (Finance), DU. Cell: 01924 75 65 94; 01683 20 27 52
E-mail: nasir_findu@yahoo.com Page 3

= 2x + 20
For maximum or minimum first condition,

= 0
2x +20 = 0
x = 10
Now,

= 2x + 20

= 2 <0. So the revenue function is maximum at x = 10. ( " 4 y}

Therefore, revenue maximizing units = 10 units.

b) Amount of maximum revenue =

= 100 0 = Tk. 100
c) If 15 units are sold, total revenue =

= 100

= Tk. 75
Problem 3: Total cost function of a firm is C =

Where c is the total cost and x is the output, and price under perfect competition is given as tk. 6,
find for what output the profit will be maximized.
Solution:
Given that, C =

Price, p = tk. 6 and Quantity, q = x
Revenue, R = p.q = 6x
Therefore, profit, TP= R C
= 6x (

)
=

Application of Mathematics in Business
Md. Nasir Uddin; BBA (Finance), DU. Cell: 01924 75 65 94; 01683 20 27 52
E-mail: nasir_findu@yahoo.com Page 4

(TP)=

For maximum or minimum first condition,

= 0

= 0

= 0
(x 6) (x 4) = 0
x = 6 or x = 4
Now,

= 2x + 10
When x = 6,

= 2.6 + 10 = <0 .So the profit is maximum at x = 6. (" 4

Therefore, profit maximizing output = 6 units.

Problem 4: For a unit demand function of p = 24 8x, where x is the number of units in thousands
and p is the price in taka, find the sales function. If the average cost per unit is Tk. 8, find
a) The profit function
b) The number of unit that maximize the profit function
Solution:
a) Given that, p = 24 8x, average cost, AC = Tk. 8
Total Revenue, TR = PQ = (24 8x). x = 24x 8

Total Cost, TC = = x = 8x
Therefore, Total profit, TP = TR TC = 24x 8

8x = 16x 8

b) Total profit, TP= 16x 8

Application of Mathematics in Business
Md. Nasir Uddin; BBA (Finance), DU. Cell: 01924 75 65 94; 01683 20 27 52
E-mail: nasir_findu@yahoo.com Page 5

(TP)=
For maximum or minimum first condition,

= 0
= 0
x = 0
Now,

=
Therefore, profit maximizing output = 1 unit.

Problem 4: If the cost function is C(x) = 4x + 9 and the revenue function is R(x) = 9x

, where x
is the number of units produced. Find the following:

b) Marginal revenue at x=5, x=6

d) Fixed cost
e) Variable cost at x=5
f) Breakeven point, that is R(x)= C(x)
g) Profit function
^ o)
i) Marginal revenue at most profitable output ( ^ o J

k) Variable cost at most profitable output

Solution:


Application of Mathematics in Business
Md. Nasir Uddin; BBA (Finance), DU. Cell: 01924 75 65 94; 01683 20 27 52
E-mail: nasir_findu@yahoo.com Page 6
Given that, R(x) = 9x

Marginal revenue, MR =

= 9 2 x
b) Marginal revenue at x=5, x=6 :
When x=5, MR = 9 2. 5 = 1
When x=6, MR = 9 2. 6 = 3

Given that, C(x) = 4x + 9
Marginal cost, MC =

= 4
d) Fixed cost:
Given that, C(x) = 4x + 9. Fixed cost, FC = 9
e) Variable cost at x=5:
Given that, C(x) = 4x + 9. Variable cost, VC = 4x
Therefore, variable cost = 4.5 = 20

f) Breakeven point, that is R(x)= C(x):
At breakeven point, R(x) = C(x)
9x

= 4x + 9

- 5x +9 =0
=

g) Profit function:
Profit, TP = R(x) C(x) = 9x

4x + 9 = 5x

9
middle term factor 4
x o
formula:
a

+ bx + c = 0
=

Application of Mathematics in Business
Md. Nasir Uddin; BBA (Finance), DU. Cell: 01924 75 65 94; 01683 20 27 52
E-mail: nasir_findu@yahoo.com Page 7

^ o):
Profit, TP = 5x

(TP)=
For maximum or minimum first condition,

= 0
= 0
x = 2.5
Now,

=
Therefore, profit maximizing output = 2.5 units.

i) Marginal revenue at most profitable output ( ^ o

When x = 2.5, MR = 9 2 x = 9 2. 2.5 = Tk. 4


When x = 2.5, R = 9x

= 9. 2.5

= Tk. 16.25

k) Variable cost at most profitable output
When x = 2.5,VC = 4x = 4. 2.5 = Tk. 10



Application of Mathematics in Business
Md. Nasir Uddin; BBA (Finance), DU. Cell: 01924 75 65 94; 01683 20 27 52
E-mail: nasir_findu@yahoo.com Page 8
Slope of the marginal revenue =

= - 2